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Company Loan Type APR Est. Pmt.

improvements and appraisal

Posted on: 09th Jul, 2009 07:23 am
Hi, 4 years ago, my Victorian home was appraised at 205,000. then 3 years ago we had a fire and it was mostly to the basement, but we took advantage of doing a lot of work while it was being repaired. We replaced two furnaces, and water heater (needed it because of the fire), plumbing, electrical, put in two energy efficent windows, replaced three lamanate floors with wood, refinished all the wood floors, repainted the entire interior, replaced all the appliances with new, and put in all new window treatments that are all historic (ouch.. $15,000. just for the window treatments!), and refinished two wooden decks. Also complete redo of interior design. And now we want to repaint the porch and wood trim on our home and re do the landscaping so we are refinancing our home and need a new appraisal. Given all that work we did since the last appraisal, will our new appraisal be higher?
sunshine, all you're going to get on here is speculation.

that being said, with all of the work you've done, we will all agree, i am sure, that there will absolutely be a higher appraised value based on all that work.

on the other hand, we don't know where you are, or what kind of real estate market is in your area, nor do we know if there are other things that might work against you in your attempt to achieve maximum value.

you can certainly go to locales like zillow.com or trulia.com to get estimates there on a current value, or check with a local real estate agent, but the truth of it is that you'll need a new appraisal to know the real answer to your question.
Posted on: 09th Jul, 2009 07:27 am
I forgot to mention, I also started a B&B in this home. Now that it is also an income producing (we still live here too) will that also change the appraisal?
Posted on: 09th Jul, 2009 07:46 am
your property is now going to be considered mixed-use (part residential/part commercial). that will affect the appraised value, also, since an appraiser would now need to seek out other mixed-use properties with which to compare yours. it's more complex now.
Posted on: 09th Jul, 2009 08:15 am
Yes, but will ilt affect it for better or for worse?(higher value or lessor value)?
Posted on: 09th Jul, 2009 08:39 am
Sunshine,

Like George said, it would be speculation for anyone to give you a straight answer. Under normal market conditions, improvements to a property will likely add some value. However, you also have a few things which could hold you back. First of all, a fire can sometimes stigmatize a property as from this day forward, you must disclose it in the seller disclosure statement to future buyers. Also, many real estate markets have taken a very hard hit over the past couple of years. Depending on your location, there may have been a significant drop in property values.

Changing the property to a B&B really changes the dynamic of the appraisal assignment and you can easily expect triple or more the cost of an appraisal from what you previously paid.

To find out for sure how all of these factors have affected your value, you will have to get an appraisal done by a local appraiser.
Posted on: 09th Jul, 2009 09:03 pm
What happened with value at a prior time, was good then. Today, you can expect in most cases that the home dropped in value and that would be normal. If you had the home today prior to the fire and valued it, then did the improvements today, yes, likely there would be a difference. The market is not static, you must consider the what ifs based on the same point in time within the market. I tell people that ask, have an appraisal done prior to any proposed improvement without the proposal and then with, subtract one from the other, if the difference is not equal to the cost then financially it is foolish to do so. The important thing is that it is the same moment in time, you confuse the issue by thinking the current market is related to a prior one. Forget that, look at the market now. Just like the stock market, past performance is no guarantee of future performance, ever hear of that. I am amazed at many questions in this forum it seems many people have their head in the sand, do people not understand this is the worst market since the Great Depression, its hard to believe people are so naive and blinded.
Posted on: 09th Feb, 2010 03:30 pm
unfortunately, the public at large is wholly uninformed about the appraisal process. not only that, but lenders as a whole are not very well informed, either. and to top it off, as i see it currently, the hvcc rules are going to make it more difficult for lenders to understand, since they are now forbidden to discuss appraisal results, methods, ideas, etc. with appraisers.

frankly, we can anticipate even less-informed people on all sides of the spectrum as a result of these new rules. the inability to contact appraisers and their staffs is going to be a major detriment in loan officers' learning about the process and precisely how homes are valued in an appraisal report. and, of course, it's not just the loan officers who'll come away clueless - it's virtually all those involved in the process.

the separation has some validity, but there still needs to be conversations of some sort between lenders and appraisers. there are far too few these days.
Posted on: 10th Feb, 2010 06:05 am
The HVCC does not require zero contact between the Appraiser and the loan officer. The HVCC does not allow what the call "significant contact." That being said you can still call the Appraiser, just be very carefull not to say anything that may be interpreted as being coercive in nature or a directive toward a value judgment and you will be okay. Some lenders have incorrectly interpreted the HVCC and do not allow their L.O's. to talk to the Appraiser at all, but that is the specific lender and NOT the HVCC. Further, there is nothing to stop the Loan Officer from submitting appropriate information to their own staff that is ordering the Appraisal or if they are out sourcing which is NOT required for a S & L or a Bank, the third party management AMC can give it to the Appraiser. Mortgage Brokers were pretty well cut out of the mix, as most of the problems (not all) came from Mortgage Brokers, second most from Mortgage Bankers. After 33 years in the business and having done business with thousands of mortgage brokers and mortgage bankers, it can be said they did this to themselves. FIRREA prohibited things like comp checks all the way back to 1989, but these people were ignorant and chose to be in violation of the law and asked for things like illegal comp checks anyway and then punished Appraisers that would not come up with their predetermined answers. The result is while that has become less of an issue, other problems replaced them and have made the process as bad and arguably worse. The bad appraisers that caused this with the bad loan officers and the bad realtors are collectively to blame. There was and is fraud and deceit at every level of the business, but the worst in my observations of 33 years as an Appraiser was from the Mortgage Brokers.
Posted on: 10th Feb, 2010 12:10 pm
"you can still call the appraiser" IF (that "if" deserves capitals) the company for whom you work allows it. fortunately, some of us have carved out relationships with appraisers that allow us to converse with them with no issues at all - essentially because those conversations are just as you mentioned - no coercion, no pleading or complaining about values or timing, etc.
yes, we have, as a general rule, the option of directing our appraisals to a specific firm or individual, but there have been so many amc's that have sprung up from within that there are severe restrictions and complications that we've not seen before.
Posted on: 10th Feb, 2010 12:20 pm
Posted on: 10th Feb, 2010 07:15 pm
The one thing is about change. Expect lots more of it. The AMCs are in the process of being regulated on both Federal and State levels. A handful of states have already passed laws, and numerous others working on passing AMC laws. HR 1728 which will probably not pass, but more or less will in another bill, will set up the TAF - The Appraisal Foundation to create courses and requirements for AMCs which will by ammending FIRREA, require all AMCs to be licensed in each state, do business in fifty states, you need fifty licenses, just like an Appraiser - no different in that respect. It will put some of these many fly by night AMC's out of business. Unfortunately some of the worst ones are owned by some of the biggest banks on the planet and can afford those fees like not even chump change, but will still fight not to do it and beg Congress for all kinds of crappy exemptions to get out of doing the right thing. Congress will also require not only mandatory state by state licensing of AMCs and certain people that work for them, but all loan officers, loan processors and title closers before all is said and done. Do not think that will happen..... Hmmmm look closer, they are looking for control and revenue, revenue and control, services to tax. Yes, they will end up eventually taxing all services and licensing makes it a little easier to do that. You think there is a myriad of paper now and cumbersome requirements, that is what I thought when I started 33 years ago, so you can be you will look back at this day and see in comparison this was no big deal either. If and yes another BIG IF, it results in better quality individuals in each of the professions serving the public and if the lenders could be trusted, which they have not proven to be trust worthy for the most part so far, then perhaps we might have hope that it will all get better. Hmmmmmm.... Optimism, pesimism. I am both, I see both are possibilities, which way will go, to date, it appears the wrong way, but that does not have to be the inevitable outcome, but we must do something about it. Quit voting for most of the politicians we have thus far.
Posted on: 10th Feb, 2010 07:16 pm
i definitely agree with your stance on the "worst ones" owned by banks. i don't know about licensing, at least as it concerns banks' loan officers. those who work for banks are typically not required to be licensed at this time; we who work for mortgage companies are...maybe it would cut down on our fees (HAH!) if they licensed more people in general.

i understand the tighter regulations - there were too many mavericks around a few years ago, and we're still suffering (big time) as a result. unfortunately, a lot of regulations are knee-jerk reactions and not fully developed when they hit. working out the bugs then takes years.
Posted on: 11th Feb, 2010 10:40 am
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